Room at the top in banking

RUNNING an investment bank in the present fallow market conditions is not much fun. This is particularly so when the firm Credit Suisse First Boston is being forced to downsize rapidly and has come under intense regulatory scrutiny.

Given these circumstances, it should come as no great surprise that John Nelson, who took the helm as chairman of CSFB Europe in 1999, yesterday sent shockwaves through the bank with a memo to staff announcing his imminent retirement.

Nelson, a 30-year veteran of investment banking who landed at CSFB after long periods at Kleinwort Benson and Lazard, makes it clear that he is not jumping to some other investment bank, nor has he fallen out with CSFB's new broom in New York, John Mack.

Now in his mid-50s, Nelson says he has simply had enough of the high-wire act of investment banking and wants the chance to do something else. He strongly resists the fashionable notion of a 'portfolio' of jobs. One has to take Nelson at his word, especially as he is delaying his departure until the first quarter of next year, which suggests no bitterness in the break.

Nevertheless, it would be unsurprising if his ambitions for CSFB - which under his stewardship joined the top ranks of European investment banks - were not affected by Mack's slash-and-burn policies as he seeks to bring CSFB costs in line with its competitors.

Reports suggest that senior staff have already agreed to take their share of the pain by abrogating agreements with Mack's predecessor and absorbing some $75m in pay cuts. This is part of a drive to cut $1bn off operating costs at CSFB.

The retirement of Nelson, a hands-on executive who took a keen interest in the client side of the business, means that CSFB joins Lazard (which has lost its own chief executive William Loomis) as an investment bank with room at the top.

With 'Mack the Knife' in charge at CSFB and Michel David-Weill at Lazard, the queue to replace them may not be that long.

Equitable payouts
THE Treasury's open mind on compensation to policyholders at Equitable Life should do something to assuage anguish. Economic Secretary Ruth Kelly makes it clear that if maladministration is uncovered in the inquiries into the failure of the nation's oldest insurer, it will look at what can be done.

While this may be encouraging for policyholders, the Government should bear in mind that many do not have time on their side. Those most affected by Equitable's collapse are people on the cusp of retirement who cannot wait years for a settlement.

We already know that there was some regulatory culpability. The 'independent' report by the Financial Services Authority into its own actions in the affair has already pointed to failings during the short but critical period that it was in charge.

Policyholders have paid dearly for the FSA's poor internal co-ordination, its failure to prepare for an adverse ruling from the House of Lords and its willingness to tolerate some questionable reinsurance arrangements.

On this basis alone, the broader inquiries by Justice Penrose and the Parliamentary ombudsman look set to uncover maladministration or worse.

The Treasury's decision to start tightening up insurance regulation now, rather than wait for the outcome of the fuller inquiries, also suggests that the government is starting to recognise a degree of culpability. Among the immediate changes will be tightening up solvency requirements so that dodgy reinsurance contracts and future profits cannot be used to hide shortfalls.

The smell of possible government compensation will not be helpful to chairman Vanni Treves and the Equitable Life board as they put the final touches to their compromise plan. Those policyholders with guaranteed annuities might feel it is not the right time to sign away their rights for a oneoff valuation lift of 17.5%.

They might prefer to take Kelly at her word and hope that the government will live up to the wording of their original contracts.

American angst
SHOPPERS may still be propping up the British economy, despite the emotional strain of the war effort, but in the US the picture is rather different.

The latest consumer confidence figures show that the index plunged to 85.5 in October from 97 in September, its lowest since 1994. Retail sales tumbled 1.6% in the latest week.

With the business recession already in place before September 11, none of this augurs well for US third-quarter output figures due today. No wonder equities and the dollar have moved into reverse.